TORONTO - The Toronto stock market closed higher Friday as investors were reassured by European regulators that only a small number of banks in the region would struggle if the economy weakened.
The S&P/TSX composite index moved ahead 46.45 points to 11,714.21 as speculation over the outcome of the "stress tests" left markets cautious.
The tests were designed to predict whether banks could survive a downturn in the economy and showed just seven of 91 European banks tested would fail. The European Union said the results should put to rest questions about the health of the continent's financial sector.
"Overall, the results were largely as expected, perhaps a couple of more banks were expected to fail the tests," said BMO Capital Markets economist Benjamin Reitzes in a note to clients.
"However, many market participants won't be satisfied with the difficulty of the stress scenarios."
TSX financial stocks were up 0.4 per cent after the report with CIBC (TSX:CM) rising $1.13 to $68.40.
The Canadian dollar was at 96.52 cents US, up 0.3 of a cent.
Meanwhile, a mixed bag of earnings results emerged from the U.S. with companies like Microsoft Corp. and Ford Motor Co. showing stronger results while Amazon.com underwhelmed.
On Wall Street, the Dow lifted 102.32 points to 10,424.62. The Nasdaq composite index was ahead 23.58 points at 2,269.47, while the S&P 500 index was up 8.99 points at 1,102.66.
Shares of General Electric were up 50 cents at $15.71 after it said it would raise its dividend two cents per share and start buying back stock because of its improved financial position.
Statistics Canada said inflation dropped to the lowest level in eight months in June, as lower gasoline, clothing and footwear prices combined to push the annual rate down to one per cent.
"The economy is recovering but ... the unemployment rate is high, there's still unused buildings and equipment so there's some underlying pressure on inflation to head lower," said John Johnston, chief strategist of the Harbour Group at RBC Dominion Securities.
"I think we shouldn't be surprised if (the inflation rate) stays below the two per cent mark for awhile longer."
Magna International (TSX:MG.A) shareholders approved a controversial plan to pay Frank Stronach about $1 billion in cash, shares and other incentives to give up his family's voting control of the company. The company's class A shares were up seven cents to $76.81.
The Toronto energy sector gained 0.3 per cent as the September crude contract on the New York Mercantile Exchange tumbled 32 cents to close at US$78.98 a barrel. Shares in Suncor Energy Inc. (TSX:SU) dropped three cents to C$33.38.
Gold shares added 0.1 per cent as the August bullion contract fell $7.80 to end at US$1,187.80 an ounce on weakening fears of inflation. Stock in Barrick Gold Corp. (TSX:ABX) lost 10 cents to C$43.86.
The TSX Venture Exchange was up 6.56 points to 1,394.98.
Overall, it was a positive week for North American markets, with the main TSX index up about 1.2 per cent for the week, while the Dow Jones industrial average closed the week about four points off the level it was at when the year started.
In Canadian earnings, Celestica Inc. (TSX:CLS) slipped to a small $6.1 million net loss in the second quarter, reversing a year-earlier profit. Revenue was $1.59 billion and its shares slipped 31 cents to $9.10.
Harry Winston Diamond Corp. (TSX:HW) has agreed to pay US$220 million in shares, cash and debt for nine per cent of the Diavik mining venture. The transaction with Kinross Gold Corp. (TSX:K) will boost Harry Winston's holding in the mine to 40 per cent. Its shares were down $1.55 to $13.
